FIRST Mutual Holdings Limited (FMHL) is withdrawing its High Court challenge against the Insurance and Pensions Commission (Ipec)'s corrective order, opting for an out-of-court settlement, businessdigest can report.
This comes after the two parties signed a memorandum of agreement in April, which set forth a plan of corrective actions for FMHL to ensure compliance with statutory and regulatory requirements.
In 2022, Ipec instituted a forensic investigation against First Mutual Life Assurance Company (FML) related to the separation of assets between the policyholders and shareholder during the period February 1, 2009, and December 31, 2021.
On May 10, 2023, FML received a copy of the forensic investigation report from Ipec and at the direction of the regulator; the subsidiary submitted its response to the Ministry of Finance the following month on June 8.
In December, FML received a corrective order from Ipec based on the findings of the report conducted by BDO Chartered Accountants.
In it, FML shareholders were ordered to pay significant sums in local currency and United States dollars to the policyholders in respect of perceived actual and potential losses, as assessed by BDO.
By February this year, FMHL filed a High Court application challenging that corrective order, which the holding company is now rescinding.
“We are just going to be settling this with Ipec out of court. It doesn’t mean to say we are in agreement with BDO findings,” FMHL chief executive officer Douglas Hoto told businessdigest.
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FML was not in agreement with the findings in the BDO report and in the Ipec corrective order.
It believed its submissions were not properly considered. Interpretations of fact, accounting standards, legal and actuarial principles, as well as currency conversion issues are in dispute.
In its recent financial statement for the year ended December 31, 2023, FMHL majority shareholder, CBZ Holdings said its directors were awaiting the conclusion of the matter between Ipec and FMHL.
“On the 22th of April 2024, Ipec and FML signed a memorandum of agreement, which sets forth a plan of corrective actions for FML to adopt in order to ensure compliance with statutory and regulatory requirements,” CBZ said.
“The memorandum of agreement also replaces the stated corrective order and sets in motion the withdrawal of the two High Court applications by FML against the Ipec.
“In light of the foregoing, the directors await the conclusion of the action plan as per the memorandum of agreement stated above to assess any possible impact on the investment in FMHL.”
Last September, CBZ Holdings completed a two-year purchase of the majority shares in FMHL as it is seeking to strengthen its balance sheet to attract external capital.
“The directors have provided additional information as shown below on how the reported group’s financial performance would be excluding the equity-accounted investments in FMHL and FMP [First Mutual Properties Limited],” CBZ Holdings said.
